BA Stock to Face Pressure
First it was the tweet by Donald Trump about Boeing Co (NYSE:BA) that stunned everyone. And now comes another piece of news that adds to the confusion over Boeing getting the Air Force One deal. BA stock gained 1.25% in the last session and closed at $154.14.
As per the latest media reports, Boeing CEO Dennis Muilenburg promised President-elect Donald Trump in a phone call on Tuesday that the company will work to limit the cost of the new Air Force One after Trump threatened to cancel plans for at least two new presidential jets. They also discussed the overall importance of American manufacturing and Boeing’s continuing strong contribution and commitment to U.S. jobs. (Source: “Trump and Boeing CEO talk about threat to cancel Air Force One program,” CNN, December 7, 2016.)
This is in response to a tweet by Donald Trump, threatening to cancel the Air Force One deal with Boeing Co over high costs.
Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!
— Donald J. Trump (@realDonaldTrump) December 6, 2016
After the call, this is what Donald Trump said in an NBC interview, “I spoke to a very good man yesterday, the head of Boeing, terrific guy, and we are going to work it out.” Trump added that he is going to negotiate prices. “If we don’t get the prices down, we are not going to order them, we’ll stay with what we have.”
It appears that going forward, Boeing executives will have to maintain open communication channels with Donald Trump in order to avoid coming in his line of fire. The company had issued a formal statement earlier, clarifying its position. Boeing spokesperson Todd Blecher said in that statement:
We are currently under contract for $170.0 million to help determine the capabilities of this complex military aircraft that serves the unique requirements of the President of the United States. We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer.
(Source: “Boeing Statement on Air Force One,” Boeing Co, December 6, 2016.)
Boeing stock is hovering around its 52-week high of $154.31 and, although the prospects of the company remain strong, BA stock may come under pressure due to the prevailing uncertainty.
The Bottom Line on BA Stock
Boeing is not only a big exporter, but also a large employer in the United States. Boeing stock has been quite resilient since the win of Donald Trump, as his policies are likely to increase military spending. And, besides being a manufacturer of commercial jets, Boeing is also a major defense contractor and stands to gain from this increased spending.
This brings home the point that the company’s management will have to be more careful with Donald Trump, which may not have been the case earlier. Trump is outspoken, and he likes to deal with companies directly. The direction of Boeing stock depends on the strength of the relationship between Donald Trump and Boeing Co.